Rio Tinto in $9.9b countercyclical lithium bet

Good morning. Here's what happened overnight and what you need to know today.

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1.

Rio’s bet: Arcadium Lithium shares rose 31% in New York to as much as USD5.56 ($8.28) per share after Rio Tinto announced it will acquire the lithium company for $9.9 billion, framing it as a countercyclical move to capitalise on low battery metal prices. Rio Tinto shares in London fell as much as 1.26% to £4.98 per share before paring losses to close slightly higher. The deal would make Rio the third-largest lithium producer after Albemarle and SQM, giving it control of over 5% of the global lithium supply with operations in Argentina, Australia, Canada and the US. Rio's chief executive Jakob Stausholm told investors the current oversupply and weakness in lithium prices will turn into a supply deficit by the end of the decade, with demand projected to grow at a compound annual growth rate of over 10% through 2040, driven by the increasing need for electric vehicles and energy storage. (Capital Brief)

2.

Fed’s records: The Federal Reserve's September meeting minutes show that although Chair Jerome Powell led the committee to a decisive half-point reduction, some officials argued for a smaller, quarter-point cut to maintain a more gradual path. Governor Michelle Bowman was the only official to dissent, but the minutes revealed broader internal disagreements. One issue for a number of officials was that such a large move was out of step with their intent to lower interest rates gradually, Bloomberg reported. Most policymakers saw rising risks to the labour market as inflation pressures ease. The Fed is expected to make quarter-point adjustments at its remaining 2024 meetings, according to futures markets. Labour market data since the meeting indicates stronger hiring with the unemployment falling to 4.1%. (Bloomberg)(Fed minutes)

3.

ANZ raids: Federal police, accompanied by ASIC officers, raided four properties on 13 August as part of the regulator's probe into alleged manipulation of a $14 billion bond sale by ANZ traders, The Australian Financial Review reported citing unnamed sources. The early morning raids were part of efforts to gather evidence for the regulator’s probe into whether ANZ traders deliberately lowered the price of bond futures contracts in April last year, potentially increasing borrowing costs. ANZ has been under investigation since February, with ASIC requesting nearly a million documents and communication records, and interviewing traders. The bank is also conducting internal reviews into inflated trade volumes and allegations of workplace misconduct, which have resulted in staff departures. CEO Shayne Elliott has pledged to address any misconduct, although he has reportedly downplayed the severity of the issues, even as the bank has been excluded from recent bond deals, including a $7 billion green bond sale in June by the AOFM. (AFR)

4.

Extended recession: Germany is facing its first two-year recession since the early 2000s, with the government revising its 2024 GDP forecast to a contraction of 0.2%. In the government’s biannual projections released in April, Habeck had forecast Germany would grow at 0.3% this year. The downgrade follows a 0.3% decline in 2023. The revision includes predictions for a slow recovery, forecasting 1.1% growth in 2025, driven by higher household consumption, exports and tax relief. If the predictions hold true, Europe’s largest economy will face its first two-year recession in two decades. Economy Minister Robert Habeck cited rising inflation, high interest rates and geopolitical instability as key drivers of the downturn, with Germany’s industrial base, particularly the auto sector, suffering. (Capital Brief)

5.

Woodward’s book: A Kremlin spokesman confirmed former US President Donald Trump sent Covid-19 testing devices to Russian President Vladimir Putin while in office during the height of the pandemic, Bloomberg reported. In his new book War, Washington Post journalist Bob Woodward claims Trump secretly sent the devices for Putin's personal use. The book also cites an aide stating Trump, the current Republican nominee, spoke with Putin as many as seven times since leaving office, while pressuring Republicans to block military aid to Ukraine. Kremlin spokesman Dmitry Peskov confirmed the shipment but denied claims of frequent post-office communications. Trump, who has boasted his ties with Putin would have prevented conflicts like the Ukraine war and Israel’s war with Hamas, denied the claims. Woodward’s book also alleges President Joe Biden gave profanity-laden assessments of both Putin and Israeli Prime Minister Benjamin Netanyahu, calling Putin “the epitome of evil” and Netanyahu “a bad guy.” (Capital Brief)

6.

Credit chase: BlackRock is exploring a purchase of private credit fund HPS Investment Partners, Bloomberg reported citing unnamed sources. HPS is also considering an IPO that could value the firm at over USD10 billion, but a bid from BlackRock would be expected at a higher valuation, according to the sources. BlackRock, already active in private credit with USD86 billion under management, is seeking to further expand in the space. Other potential suitors, including CVC Capital Partners, have shown interest in preempting HPS’s IPO, according to the report. The deal is uncertain, and talks may not result in an agreement. HPS, managing USD98 billion in private credit, has seen major growth since it bought itself out from JPMorgan in 2016 in a deal valuing it at around USD1 billion. (Bloomberg)

7.

Google breakup: The US Justice Department (DoJ) told a federal judge it is considering recommending that Google be forced to sell off parts of its operations to alleviate the harm caused by its monopolisation of the online search market. In a 32-page court filing cited by Bloomberg on Tuesday, antitrust enforcers said judge Amit Mehta could also force the Alphabet subsidiary to provide access to the underlying data it uses to build its search results and artificial intelligence products. The DoJ said it is "considering behavioral and structural remedies that would prevent Google from using products such as Chrome, Play and Android to advantage Google search and Google search-related products and features — including emerging search access points and features, such as artificial intelligence — over rivals or new entrants". The filing represents the US government's first push to dismantle a company for illegal monopolisation since unsuccessful efforts to break up Microsoft two decades ago. (Capital Brief)

8.

7-Eleven push: Alimentation Couche-Tard has raised its bid for Japan’s Seven & i Holdings, the owner of 7-Eleven, by about 20% to ¥7 trillion ($69.85 billion), Bloomberg reported citing unnamed sources. The Canadian company’s revised offer, submitted on 19 September, represents a 20% premium from the previous bid, the publication said. Shares of Seven & i initially rose 12% following the news, before settling 4.7% % higher, reflecting investor scepticism. No substantive negotiations have occurred since, according to the report. Seven & i acknowledged receiving the proposal saying the discussions were private, non-binding and confidential, as requested by Couche-Tard. Analysts expect Seven & i to reveal asset divestment plans in its upcoming earnings, possibly including the sale of part of its stake in Seven Bank. (Bloomberg)